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Although the overall automotive chip market is still under pressure, silicon carbide (SiC), as a new force in recent years, is taking on the role of one of the major growth engines as new energy vehicles accelerate their embrace of related devices.

Based on recent disclosures from leading semiconductor manufacturers, the growth rate of silicon carbide-related businesses will inevitably be dragged down by the pressure on the overall automotive market in the short term, but it is still a growth market segment that has attracted much attention.

As more and more vehicle manufacturers consider personalized design and ensure stable supply, it is inevitable for vehicle manufacturers to join hands with silicon carbide manufacturers. The information released by major semiconductor manufacturers recently also shows that the progress of this cooperation is accelerating and deepening. Among them, China, as an important exporter of new energy vehicles today, is also frequently mentioned by suppliers.

TrendForce believes that, overall, SiC is in a fast-growing and highly competitive market, where economies of scale are more important than any other factor. Leading IDM manufacturers have changed their conservative and steady strategic stance in the past and are actively investing in SiC expansion plans in the hope of establishing a leading position. So far, more than 10 manufacturers around the world are investing in the construction of 8-inch SiC wafer fabs. It can be foreseen that as the market scale continues to expand in the future, competition in the SiC field will become more intense.

Ramp-up period

The business of manufacturers mainly focusing on the silicon carbide market has been on an upward trend in terms of revenue performance. However, considering the constraints of factors such as the initial factory construction and manufacturing costs and the adaptation and certification cycle, the company's profit performance will be affected to a certain extent in the early stages of development.

In the A-share market, manufacturers whose main business focuses on the silicon carbide market have achieved relatively good revenue in the first half of this year, and their profits are also continuing to improve.

Tianyue Advanced is a supplier of silicon carbide substrates. According to its financial report, it is expected to achieve operating income of 880 million to 980 million yuan in the first half of 2024, an increase of 100.91% to 123.74% year-on-year; the net profit attributable to the parent company's owners after deducting non-recurring gains and losses is expected to be 95 million to 105 million yuan in the same period, compared with -110 million yuan in the same period last year. It is expected to turn losses into profits in the first half of the year.

Tianyue Advanced's performance has experienced some twists and turns in the past few years, which is to some extent related to the company's business transformation. Comprehensive historical announcements show that in recent years the company has been actively adjusting its production capacity layout, from focusing on the semi-insulating substrate market in the early days to accelerating the layout of conductive substrates, which will help boost the company's subsequent performance.

According to the semi-annual performance forecast of Xinlian Integrated Circuit in 2024, it is expected to achieve revenue of approximately RMB 2.88 billion during the period, an increase of approximately 14.27% year-on-year; the net profit attributable to the parent company excluding non-recurring items is approximately RMB -750 million, a year-on-year reduction in losses of approximately 36.5%.

Regarding the reasons for the performance changes, Xinlian Integrated Circuit stated that in the first half of the year, benefiting from the strong demand in the new energy vehicle market and the consumer market, the rapid growth in revenue from newly built production lines such as 12-inch silicon-based wafer products and silicon carbide products directly drove the company's revenue increase; during the reporting period, revenue from the automotive and consumer fields both increased; the revenue from silicon carbide MOSFET products increased by more than 300 million yuan year-on-year in the first half of the year, a year-on-year increase of 329%.

Some manufacturers are in the process of building and ramping up their silicon carbide businesses. For example, overseas giant Wolfspeed continues to push forward the capacity utilization of its cutting-edge 8-inch substrate factories. As of June this year, the utilization rate of its fully automated 8-inch wafer factory in Mohawk Valley was only 20%, and it is expected to increase to 25% by the end of the year. Overall, the company's profitability at this stage is not as good as the industry expected. The domestic A-share company Silan Microelectronics is also facing losses in its silicon carbide business due to similar reasons.

Silan Microelectronics' financial report shows that its current performance is mainly supported by silicon-based products. In terms of silicon carbide business, its subsidiary Silan Mingga 6-inch SiC power device chip production line is still in the capacity ramp-up stage. The output of SiC chips is relatively small, and the fixed production costs such as asset depreciation are relatively high, resulting in large losses. Currently, Silan Mingga SiC chip production line is in a rapid increase in volume. As output continues to increase, its losses are expected to gradually decrease in the second half of the year.

"In the long run, since China has more development experience in the new energy vehicle industry chain, and as the largest application market for silicon carbide, it means that the development of the domestic silicon carbide industry has a better environment for development. Although there is still a certain gap between the advanced level of major European and American countries, I believe that as China gradually completes the technical reliability verification, it will soon develop." A silicon carbide industry practitioner analyzed to the 21st Century Business Herald reporter.

Intensified competition

Although mainstream international power semiconductor manufacturers have silicon carbide businesses, they are currently still mainly supported by silicon-based power products, so most of them do not disclose related performance on a separate quarterly basis.

However, silicon carbide remains a key topic in performance exchanges, and it also reflects the bottlenecks and competitive situations currently faced by mainstream manufacturers in this field.

In the last two performance exchanges, STMicroelectronics executives said that electric vehicle-related components are expected to grow in the second half of the year, but the growth rate is lower than expected. The growth of the silicon carbide business in the first half of the year was offset by inventory adjustments by downstream vehicle manufacturers. Looking ahead to the whole year, the growth rate of silicon carbide business revenue will slow down compared with 2022 and 2023, which is related to the adjustment of its full-year plan by important customers. STMicroelectronics expects silicon carbide business revenue to reach US$1.3 billion in 2024, slightly lower than previously expected.

The company also highlighted its development in the Chinese market. In June 2023, it established a joint venture with Chinese manufacturer Sanan Optoelectronics in Chongqing; in November, the ST Packaging and Testing Innovation Center opened in Shenzhen. Cao Zhiping, executive vice president of STMicroelectronics and president of China, previously told a reporter from 21st Century Business Herald that this is the first time that ST has established a large-scale packaging and testing innovation center outside of Europe, marking the company's continued expansion in China.

"The above measures are an important supplement to ST's deployment of the complete industrial chain in China. Today, our roots in China are already very deep. In addition to the above new investments, we also have 17 offices in China, 1 packaging and testing factory in Shenzhen and 7 technology innovation centers." He continued.

According to the explanation at the earnings conference, STMicroelectronics believes that the Chinese market, as a growing market, is facing competitors from all over the world, including local competitors. This is why the company is actively building an ecosystem in China. Recently, it also announced a long-term silicon carbide supply agreement with Geely Automobile to provide silicon carbide power devices for the latter's electric vehicle batteries.

ON Semiconductor, which is accelerating its business shift to the silicon carbide market, recently released its second-quarter report showing that its overall performance during the period was still declining, but the company did not disclose the specific revenue and profit of the silicon carbide segment.

When describing its business expectations, ON Semiconductor pointed out that the revenue growth of silicon carbide-related businesses will be twice the market growth rate, and will promote large-scale vertically integrated manufacturing.

Although Tesla is the first new energy vehicle manufacturer in the industry to begin adopting silicon carbide devices, as more domestic participants actively embrace silicon carbide, China is undoubtedly becoming an important market that the current leading manufacturers are actively competing for.

The aforementioned industry insider told the 21st Century Business Herald reporter that the use of the 800V platform is gradually becoming the mainstream trend of electric vehicles, especially the recent price decline in the field of silicon carbide materials, which will be more conducive to the commercialization process. The price reduction is due to the continuous increase in production capacity on the one hand, and the maturity of technology on the other.

TrendForce believes that compared with silicon-based devices, SiC power devices can better meet the needs of high-voltage fast charging, helping new energy vehicles to extend their driving range, shorten charging time, increase battery capacity, and achieve lightweight body. At present, popular models of many global automakers such as Tesla, BYD, Ideal, Weilai, and Xiaomi are equipped with SiC devices. With technological progress and expansion of production capacity, SiC power devices are expected to accelerate penetration in the field of new energy vehicles, driving yield improvement and cost reduction. SiC's potential application markets also include industry, photovoltaic storage and charging, rail transit and other fields. In 2023, the global SiC power device market size will be approximately US$3.04 billion, and is expected to rise to US$9.17 billion by 2028, with an annual growth rate of 25%.